Characteristics of the CV Industry Flashcards
4 key characteristics of the CV industry
- customer requirements
- regulations
- product portfolio
- business characteristics
What are the customer requirements?
CVs are investment goods with a strong focus on the total cost of ownership (TCO)
What are the regulations about?
Emissions and safety
What is so special about the product portfolio?
Customer requirements and country-specific regulations drive complexity within the product portfolio
What are the business characterisitcs?
Sales are highly cyclical. After sales as a major profit driver
Key differences to passenger vehicles (PV)
- Required lifetime (km) 10x higher
- Annual runtime and milage up to 15x higher
- customers often stay with the brand: retention rate >65%
- fuel consumption a major cost factor
- product lifecycle twice of PVs
- unit volume only 1/25th of PV
Required lifetime km
1.3m
annual milage
130k km
- PV only 14k
annual runtime in h
2000 to 8000
Truck - Type of good
investment
Fuel consumption l/100km
30-35l
Emission reduction of NOx received
80%
Vehicles sold annually
3m (PV 75m)
Customers - Who has the largest fleet size?
Large fleet operators (>100 trucks; 30% market share)
- trend is a growing market penetration
Customers - Who has 6 to 100 vehicles?
Municipalities (10% market share),
- ongoing privatisation (shift into large fleets)
Small-to-medium fleet operators (30-40% market share)
- Shrinking share due to consolidation
Customers - Who has 1-5 vehicles?
Special-vehicle operators (<5% of market share)
- steady market penetration
Owner operator (20-30% market share)
- surviving in transport market niches and in businesses beyond transport
For who is the vehicle the tool?
- Large fleet operators
- Small-to-medium fleets
- Owner operators
- > or the others only a tool not the tool
OEM
original equipment manufacturer
What should the OEM do with regards to the purchaser of transport services?
Needs and requirements of operators and purchasers of transport services are to be closely monitored. Although the OEM sells vehicles and service packages to the commercial vehicle operators the OEM needs to understand the purchaser.
TCO breakdown worldwide
Fuel (40%) Driver (30%) Repair and maintenance (10%) Vehicle (10%) Admin and service (5%)
Key value drivers for customer expectations
Purchasing cost, operational cost, residual value
Key elements of the complex regulatory environment
Emission regulations
Safety regulations
Taxation, duties
Specific conditions
Main consideration for truck OEMs of regulatory environment
- Powertrain technology and exhaust gas treatment
- Weight and size specification
- cabin space and crash stability
- technical assistant systems
- location of production site
- local sourcing partners
Product Portfolio in North America
- conventional truck with engine in front. Driven by high comfort and safety requirements
Product Portfolio in Brazil
- Advanced products built by European OEMs - in response to high safety requirements
(not yet on European level. 20% European vehicles)
Product Portfolio in Europe
High-tech product in cabover style - driven by strict regulations and customer needs
Product Portfolio in China
- Fast follower driven by regulations, infrastructure and professionalisation (20 years older than in Europe)
Product Portfolio in Russia
- Powerful products with four wheel drive; relatively low-tech
- driven by market needs
Is product complexity high or low? How many times is each configuration built?
Product complexity and relatively low volumes - every configuration only built 1.31 times on average
What to now about the volatility of the CV market?
- Strong correlation of CV sales and economic development in developed markets
- CV purchases often deferred in a hostile economic environment to make room for more urgent undertakings
- in addition to economic reasons, sales are heavily impacted by regulations
How much do after sales contribute to revenues and profits?
Revenues made mostly in new truck sales. After sales contribute with 20% to revenues, but make up >50% of profits.
–> After sales business is far more stable revenue source - critical to stabilise OEM business. As revenues of truck sales decrease for one client over time the after sales increase.
